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On The Fossil Fuel Subsidy Red Herring

My view on fossil fuel subsidies remains that most are not subsidies at all, but rather energy (mostly oil) producing developing nations selling their fuels closer to the actual price of production rather than the global market price. Analysis here. Coming numbers on fossil fuel subsidies will guaranteed be much lower simply because the global market price of oil has dropped substantially. 

The best example I can give here is the following from the above linked article: 

Forcing the Middle East (which can still extract oil for $20/barrel or less) to sell this oil locally at $100/barrel would be similar to forcing a solar farm in Mexico to sell electricity at the same price as that required by a solar farm in Greenland. The only reason why the lower oil prices in MENA nations are labelled as a subsidy is because the highly concentrated liquid nature of oil makes it highly suited for international trade. If oil was less suited for international trade (like solar power), the subsidies reported in the above figure would be much smaller.

May 15, 2015    View Comment    

On Seeking Consensus on the Internalized Costs of Energy Storage via Batteries

Musk is getting a bit slow... Almost one year after this article was published :-)

Yep, the Powerwall indeed made big news. Hopefully this will lead to some more reliable price information becoming available soon. $350/kWh is not bad, but this excludes installation, additional equipment (inverter) and profit margins. Once it starts selling, I will definitely add this to my list of real-world price trends.

The Li-battery I have been following for about a year remains rooted to $1000/kWh. This article also led to some interesting discussions with a battery system installer in Arizona which lists all-in costs for a system with specs similar to the Powerwall to be around $1000/kWh. 

Another interesting thing about the Powerwall system is that the maximum power output is only 2 kW, implying that the system will need 5 hours at full capacity to fully discharge. In the real world, this implies rather low utilization rates, leading to high LCOE numbers. 

May 5, 2015    View Comment    

On Internalized Costs Results from the Seeking Consensus Project

I only looked at the effective cost of transportation fuel coming from different energy options. Each of the articles linked at the top of this article has a section on energy for transportation. All options are based on liquid hydrocarbons (produced through oil refining, Fischer Tropsch, fermentation or electrolysis) to get a common ground for comparison except for the case of distributed PV where I did an estimation for EVs. 

April 29, 2015    View Comment    

On Seeking Consensus on the Internalized Costs of Solar Thermal Energy

DATA: Internalized cost of solar thermal water heating: $15/GJ. This is for a capital cost of $40/gal (e.g. $3200 for an 80 gallon system) replacing a standard electric water heater costing $10/gal, and a solar fraction of 70% (fairly sunny location). 

April 24, 2015    View Comment    

On No Fuel Costs: The Sexy Seduction of Renewables

My point was simply that "no fuel costs" is certainly not what drives investment in wind/solar - favourable policy is. 

About the unsubsidized costs, you should scan through the data presented in the Seeking Consensus series I'm writing for TEC. Perhaps you can make some contributions. 

On the topic of developing nations, what you are actually referring to is China. In 2014, China was responsible for about two thirds of the clean energy investment of the entire developing world. Why can/must they do this? Because of coal. The Chinese economic miracle that lifted hundreds of milions out of poverty in record time (and facilitates heavy investment in more expensive clean energy) could not have happened on anything other than coal (take a look at the last graph in this article for some perspective). On the flipside, Eastern China burns half the world's coal on about 3% of the world's surface area. Obviously this will have negative effects that China's increasingly affluent population is very concerned about.

China has to invest in clean energy to maintain social order and can do so because of coal. Thus far hydro has carried by far the most weight in this regard (again 6 times as much growth as wind and solar combined in 2014), but we will see what happens when hydro maxes out. In the meantime, there are many poorer nations that would like nothing more than to follow the coal-fired economic miracle of China. 

April 17, 2015    View Comment    

On No Fuel Costs: The Sexy Seduction of Renewables

Firstly, the thing that drives investment in renewables is guaranteed profits secured through favourable policy. Many examples exist where investment in renewable energy has plummeted after the policy environment changed. For example, the most economic modern renewable, onshore wind, located in the most suitable country in the world, the US, experienced a 93% drop after the PTC expired as recently as 2013. 

Secondly, fuel costs represent a small fraction of the cost of electricity that comes out of your wall socket. All energy investors know this and when their own real money is at stake, they will do real calculations instead of repeating "no fuel costs" over and over. 

The most important barrier for "no fuel cost" intermittent renewables in the open market is that the value of the electricity produced by an installed facility will rapidly decline as more capacity is installed. An example for Germany is shown in a previous article. As an investor, I would certainly not invest in such a technology that will give steadily declining revenues over its operational lifetime unless the governments gives me a fixed guaranteed income. 

A more informative angle for the type of readership on TEC might be the attractiveness of technologies like wind/solar (and also nuclear) in an environment with steadily declining (now going negative) interest rates. Technologies with a cost structure heavily weighted towards CAPEX become more attractive in such an environment of stagnating/declining economic growth, whereas technologies with costs weighted towards OPEX (e.g. fuel costs) become more attractive in rapidly growing regions (i.e. the developing world that will emit triple the CO2 of the developed world as little as two decades from now). 

April 17, 2015    View Comment    

On Why Ecomodernists Should Embrace Wind Power

I'm always quite wary of these heavily technology driven approaches to addressing the 21st century sustainability crisis. In my opinion, our best route is a gradual mindset shift (facilitated by the amazing global communication power granted by the internet) where people gradually realize that more happy life years can be gained from less consumption. When looking at energy, this mindset will make everything easier by requiring less energy and also increasing the willingness to pay for more expensive clean energy. 

Even though this mindset shift is happening slowly at present, it certainly is happening. More and more people are realizing that their lives can be healthier, happier, more productive and less cluttered as they intelligently reduce material consumption. The obvious competitive advantage that this philosophy of more production and less consumption brings is also very attractive in the marketplace. 

Naturally, this mindset shift is starting in the developed world. To some degree it is being forced upon people by the dynamics of the global economy (e.g. median US household income is back to levels last seen in 1995 and the gradual emergence of negative benchmark interest rates around the developed world is a clear indication that the future will actually be smaller than the present), but more and more people are starting to consciously and proactively make this transition. 

Meanwhile, developing nations should be allowed to industrialize in the fastest possible way (e.g. the China coal model) in order to limit population growth and rapidly increase the level of awareness of the population. By the time they reach sufficiently developed levels, the example pathway to happiness and longevity set by the developed world should be much more evolved than today's consumerist paradigm.

Technology will undoubtedly play a major role, but I think the gradual evolution of global societal mindset (and the resulting reduction in per capita material consumption) will be more important. 

April 17, 2015    View Comment    

On Seeking Consensus on the Internalized Costs of Energy Conservation

DATA: Cost of energy conservation in transport: -$6/gallon. This is taken to be the smallest number in the example in the article. 

March 31, 2015    View Comment    

On Seeking Consensus on the Internalized Costs of Energy Conservation

DATA: LCOE of energy conservation: -$300/MWh. Although this is very hard to estimate with any degree of accuracy, it could be somewhere below half of the savings associated with downsizing the house as in the example in the article.

DATA: This assumption can also be extended to heat. When -$300/MWh is converted to costs per unit of primary energy by assuming a multiplication factor of 2 between electricity and heat, the cost amounts to -$42/GJ. 

 

March 31, 2015    View Comment    

On Seeking Consensus on the Internalized Costs of Energy Efficiency

DATA: Levelized cost of efficient transport: $1.31/gal according to the example in the transport section of the article for a 10 year car ownership period.

March 23, 2015    View Comment    

On Seeking Consensus on the Internalized Costs of Energy Efficiency

DATA: Levelized cost of efficient heating: $6/GJ according to the example in the heating section of the article. 

March 23, 2015    View Comment    

On Seeking Consensus on the Internalized Costs of Energy Efficiency

DATA: LCOE of efficiency: $36/MWh according to the example in the electricity section of the article. 

March 23, 2015    View Comment